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Agriculture: striking a balance

V. Jayanth

Any reforms agenda for agriculture must focus on technology, credit, and marketing.

SAVING THE CROP: Samba paddy being harvested in Tamil Nadu's Thanjavur district. In many rural areas in the country, there is shortage of proper storage facilities for farm produce. — Photo: M. Srinath

THE AVERAGE growth in Gross Domestic Product (GDP) from agriculture over the past decade has been estimated at a mere 2.5 per cent. The average growth in foodgrain production during the same period has been even lower, at 1.75 per cent. For the Indian economy to reach a higher growth trajectory of 8 to 10 per cent, agriculture has to become a more "rewarding" sector. There is a growing body of opinion that favours liberalisation and reforms to make this happen.

It is the fear of industry — multinationals and corporates — taking over the land and driving out small and marginal farmers that is holding back reforms.

Through the 1990s, the share of agricultural trade in the country's GDP rose from 16 per cent to 20 per cent. Yet the growth in agriculture itself remained sluggish. There has been some peripheral impact of the economic reforms on this sector, but a comprehensive agenda is yet to emerge. And unless there is a broad political consensus — involving States Governments and farmers' associations — reforms cannot succeed. Whatever the centrality of the Union Government in policy-making, agriculture remains a State subject and it is up to the State Governments to push reforms.

One of the centrepieces of reforms is the model Agricultural Produce Marketing (Development and Regulations) Act 2003, which has not been fully accepted or adopted by the States. The Confederation of Indian Industry (CII) has been pushing the States to bring their legislation in tune with the model Act. The CII wants to focus on agricultural marketing and contract farming to help boost investment and productivity. The need for rural warehouses and cold storage chains in the rural areas can hardly be over-emphasised.

There is a feeling the agriculture sector is now exactly where industry found itself in 1991. The era of liberalisation and reforms that swept the industrial sector have only just touched the agricultural sector in the last 15 years. Advocates of reform seek a sharp focus on a comprehensive, yet practical agenda for agriculture.

To start with, the agenda must focus on three core issues — technology, credit, and marketing. Industry and a section of farmers feel technology and marketing should come from the private sector, which must be encouraged to not only invest but also participate in the agricultural revolution that has become imperative now. Conceding the sensitivity of land ownership issues, industry sources strongly advocate `contract farming' as a viable alternative. In such an approach, the land rights of small farmers can be protected by law. The contract can then focus on technology, seeds or other inputs, quality control, productivity and marketing of the produce. While the contracting firm is assured of quality and production, farmers are assured the best technology and a reasonable price. They are not at the mercy of the market forces. In a season or two after the trials, they may be in a position to bargain for a better deal.

Another reason for advocacy of private sector entry into the agriculture sector is to create sustainable rural infrastructure. From the procurement centre to the warehouses, the produce remains largely at the mercy of the weather. And invariably, one part of the country or the other comes under the influence of the monsoon. The problems of moisture content, decay, and poor quality continue to plague the farmers. The inadequate storage network also hits the government agencies that procure the paddy, wheat or other produce.

At the heart of these problems lies the cost of production. With the Centre more inclined to cut food subsidy, at least in a phased manner, farmers and scientists will have to work on cost reduction.

But finance remains the core issue for most farmers. With the virtual collapse of the cooperative system, both on account of mismanagement and the continuing cycle of droughts and floods, farmers are unable to pay back their loans and cooperatives become ineligible for "recycling" advances from either the Reserve Bank of India or the National Bank of Agriculture and Rural Development (NABARD). Consequently, the commercial or scheduled banks are asked to step into the market. But the defaulting farmers become ineligible for bank loans because they cannot secure a `No Objection Certificate' from their cooperative banks. This vicious cycle forces the farmers into the clutches of private moneylenders, who advance funds at usurious rates. Unable to pay even the interest, let alone the principal, some farmers end their lives.

The Centre is now talking in terms of reviving and revamping the cooperative sector with the injection of some Rs.15,000 crore. It is not enough to just pump in the funds. There has to be a complete reform of the cooperative banks. It has to be handed back to genuine farmers and primary producers. Care must be taken to ensure that it does not fall into the hands of local politicians, who tend to use the bank for "patronage," without seeking to protect its interests. Now that the Vaidyanathan Committee report is with the Government, the viable and practical recommendations have to be implemented. The Centre and the States must work together to ensure re-railing of the cooperative sector and possibly the rural banks, to make rural credit affordable.

On top of everything comes the cropping pattern. Farm scientists have called for an end to the "excessive dependence" on foodgrains — the stable crops of paddy and wheat. There has to be a movement towards pulses, oilseeds, horticulture, and floriculture. Simultaneously, the soil needs to be nourished with the right balance of crops. Farmers should be weaned away from excessive use of fertilizers and pesticides. Only then can the farmers genuinely prosper and the agriculture sector achieve its growth potential.

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